Legal Q and A: The duty of mutual trust and confidence

Constructive dismissal claims regularly cross the desks of employment lawyers and it’s a rare claim that doesn’t allege that the employer has acted in breach of the duty of mutual trust and confidence. Although claims will not always succeed, employers should understand how breaches can arise in order to minimise their exposure to risk. Amy Whiting, associate at Burges Salmon LLP, looks at the steps employers can take to avoid allegations that they have breached the duty of mutual trust and confidence.

Q. What is the duty of mutual trust and confidence?

Every contract of employment contains an implied duty that neither employer nor employee will act so as to breach the duty of mutual trust and confidence that exists between them without good reason. If either party does breach the duty, it can entitle the other to take action – a breach by the employee may entitle the employer to terminate the contract of employment, a breach by the employer may entitle the employee to resign and claim constructive dismissal.

While the duty is a mutual one, most claims citing breach of trust and confidence are brought by employees. In order to succeed, an employee needs to show that the effect of the employer’s conduct was likely to destroy or seriously damage trust and confidence between the parties, even if that effect was not intended. If there is reasonable and proper cause for the employer’s conduct, there will be no breach.

Q. How might a breach arise?

Everyday workplace scenarios can provide fertile ground for potential breaches. Prevention is better than cure and employers can take steps to minimise the risk of claims:

Grievances: it is not uncommon for a manager to ignore an employee’s concerns because they are too busy or believe the complaint is without merit. However, a failure to take an employee’s concerns seriously and to deal with them in accordance with your internal policy could amount to a breach. If the policy is not followed, you should have a sound reason for this, which you should explain to the employee.

Disciplinary procedures: take care when deciding whether or not to suspend an employee during disciplinary proceedings. Consider the severity of the alleged misconduct and evaluate the risks of keeping the person in the business before making your decision.

Bonuses/pay/benefits: misplaced expectations can lead to claims that the duty has been breached – the more open and transparent you are about the criteria used when making awards, the lower the risk of the claim. Document individual arrangements to minimise misunderstandings.

Working arrangements: imposing detrimental changes to an employee’s working arrangements, such as shift patterns or workplace location, can often give rise to complaints that the duty has been breached. Consider the effect of the change as against the business reasons, give advance notice and discuss the change with the employee with the aim of obtaining their consent.

A breach of the duty need not relate to a one-off event. Employees can rely on a course of conduct by the employer culminating in a “final straw” event that leads the employee to resign. However, making amends before the situation reaches the “final straw” can prevent the matter escalating to a point where trust and confidence is breached.

Q. Can an employer remedy a potential breach?

In Assamoi v Spirit Pub Company (Services) Ltd UKEAT/0050/11, a manager made spurious allegations that an employee was absent without leave when he was on pre-arranged leave that he (the manager) had previously authorised. The manager’s conduct in wrongly subjecting the employee to disciplinary proceedings and then refusing to apologise for this mistake could have amounted to a potential breach of the duty, but the breach was prevented when the investigating managers realised the allegations were without foundation and took no further action. However, once a breach occurs, an offer to make amends cannot ‘cure’ the breach although it may be sensible to attempt to do this anyway as you may win the employee round.

Q. Can an employer rely on an employee’s breach of the duty to terminate employment?

While it is usually the employee who seeks to rely on the employer’s breach, the duty is a mutual one and so can be relied on by an employer if an employee behaves badly. A breach of this duty is sometimes used by employers as a reason for terminating a senior executive appointment where the relationship has broken down – however, it won’t cover all situations. In Handshake Ltd v Summers UKEAT/0216/12, a breakdown in negotiations between the employer and a senior manager over the terms of his employment contract did not amount to a breakdown of trust and confidence.

Q. What is the key thing employers should do to reduce the risk of a breach?

Poor communication is often at the heart of this type of dispute – if you’re looking to reduce risk, encouraging managers to deal with difficult issues before they escalate is a good place to start.